A storm is brewing: Antecedents of disaster preparation in risk prone locations

Abstract

Research Summary Research emphasizes the value of disaster preparation and the importance of experience in doing so, yet most companies fail to prepare. The antecedents of preparation are poorly understood, in part, because experience by itself only partly explains the story. To address these concerns, we developed two unique surveys: one from an international survey in 18 disaster‐prone countries and another from a U.S. survey in New York City and Miami. We find that organizational experience with natural disasters increases preparedness for future hazards. Also, organizational learning from other businesses and organiztions positively mediates this relationship. Managers are more willing to learn from others in locations characterized by high‐impact, low‐frequency disasters. In areas with low impact, high frequency disasters, managers more likely misjudge the severity of natural disasters. Managerial Summary Despite the increasing frequency and severity of floods, storms, wildfires and other natural hazards, why do some firms in disaster‐prone areas prepare while others do not? To investigate, we conducted two studies: an international survey in 18 disaster‐prone countries and a U.S. survey in New York City and Miami. In both surveys, managers are more likely to prepare when their companies experienced prior disasters. Managers operating in locations characterized by high‐impact, low‐frequency disasters are more willing to learn from others. In contrast, managers in areas characterized by low impact, high frequency disasters, are more likely to prepare alone. Since effective disaster preparation typically entails working with, and learning from others, those companies that choose a go‐it‐alone strategy may misjudge disaster risk.

Multinational enterprises and natural disasters: Challenges and opportunities for IB research

“…The degree to which a particular location faces a natural hazard is a function of the impact and frequency of the hazard (i.e., the threat; natural forces), and the vulnerability of society to the threat of that disaster (i.e., the ability of humans to mitigate or exacerbate the threat; human involvement) (Fuchs et al, 2012 : 1969; Oetzel & Oh, 2021 ). Based on the historical record and scientific analysis, it is possible to estimate whether a particular location is prone to specific types of hazards such as earthquakes, volcanic activities, storms, and wildfires.…”

“…This lack of awareness and knowledge hinders managers with respect to allocating resources to prepare for and manage the threat of natural disasters. This causes delays in response and recovery and thus operational disruptions when major disaster events occur (Oetzel & Oh, 2021 ; Webb et al, 2000 ). This lack of awareness (or low perception) may be attributed to the fact that managers doubt that they can manage or prepare for natural disasters, that the preparation and management of natural disasters is the role of private sector, and/or that the natural disaster will actually occur (Oetzel & Oh, 2021 ; Slovic, 2000 ).…”

“…Therefore, MNEs should develop location-specific knowledge and capabilities that can be achieved through learning from and experience with various local partners. To identify local government capacity around disaster preparation and response, and to identify local nongovernmental organizations (NGOs), firms, and other actors that may serve as partners, require time and intentionality (Oetzel & Oh, 2021 ). Ultimately, effective disaster management relies on these location-bound FSAs when MNEs cannot find alternative locations or partners.…”

“…Like other types of natural hazards, including the potential for floods, wildfires, storms, and earthquakes, among others, contagious viruses need not result in disasters such as epidemics or pandemics (Oetzel & Oh, 2014 ; Oh & Oetzel, 2011 ). It is when society is not prepared that naturally occurring hazards are most likely to become disasters (Oetzel & Oh, 2021 ).…”

Navigating the New Normal: Which firms have adapted better to the COVID-19 disruption?

“…With few notable exceptions (e.g. Oh and Oetzel, 2011;Darendeli and Hill, 2016;Oetzel and Oh, 2021), most research into crises has focused on financial events (such as the GFC of 2008 or the Asian financial crisis of 1997) that have affected a large number of firms across the world (e.g. Filipetti and Archibugi, 2011;Paunov, 2012;Hud and Hussinger, 2015;Zouaghi et al, 2018;De Figueiredo et al, 2019;Nemlioglu and Mallick, 2021).…”